How the market is (Re)defining digital and physical risks

In this edition of Inside Commercial Insurance, we focus on the digital and physical risks commercial companies face, from small business up to the middle market. 

Innovation and risk are advancing in tandem across today’s business landscape. Leaders are investing heavily in technology—particularly tech infrastructure and AI-related tools—and their top three risks are all linked to this migration, according to recent survey data.¹

Meanwhile leaders are well aware of the diverse impacts physical risks can have on their business, with many citing operational disruptions, brand impacts and financial disruptions following natural disaster events.

Across several sectors surveyed, the prominence of digitalization-driven risk was evident. Cybersecurity and/or digitalization and tech advancement ranked as a top-three risk in nearly every industry studied—from manufacturing and wholesale to financial institutions and construction—underscoring the broad and systemic impact.

This comes at a time when companies are not only adopting technology, they are embedding it into their operations, making it central to business strategy, operations and growth. 

As leaders pursue the top benefits of AI—improved operational efficiency, reduced operational costs and better customer satisfaction—they are also cognizant of barriers to success.

These risks affect each sector differently. For example, technology and life sciences companies are balancing the need to drive rapid innovation with heightened exposures. For healthcare organizations and financial institutions, cyber risks are inextricably linked to regulatory pressures. 

While digital risks dominate, physical threats continue to exert significant pressure on organizations. More than one-third (35%) of leaders view physical risks—including extreme weather, rising sea levels, and temperature changes—as major threats to their properties and business continuity within the next five years.  

Concerns about extreme weather, infrastructure disruptions, supply chain interruptions, and pollution/emissions are influencing long-term strategies: Nearly one quarter (23%) say physical risks affect where they manufacture distribute and/or market products.

How are businesses using the tools available to mitigate pressing risks? There is significant room to improve mitigation efforts, as revealed by the survey. Many companies report needing more insurance across critical areas—including cyber, property, liability and specialty lines.

Only 26% of respondents are fully prepared for cyberattacks, and only 24% are fully prepared for natural catastrophes, convective storms and major weather events. More than half (56%) lack detailed assessments or understanding of the long-term physical threats to their properties.  

However, commercial companies – with their trademark of adaptability and agility – may turn the tide. Reflecting a growing recognition of its role in resilience-building, many companies expect to increase their investment in resilience for their properties. 

At Chubb, we know that the risks facing companies will continue to evolve and, when it comes to understanding and managing them, industry dynamics matter. This is the foundation of Chubb’s approach: We provide insurance for the full spectrum of exposures –delivering solutions grounded in deep industry expertise, addressing the nuances of risk faced by organizations of all sizes across every sector.  

Chubb’s Commercial Insurance division, supporting small business to middle market, provides tailored risk consulting and resilience services to help businesses fortify their operations to withstand adverse events ahead.

In our next issue of Inside Commercial Insurance, we examine appetite and how Chubb is bringing greater ease, speed and clarity to brokers and agents building business with small, lower and upper middle market companies.